Another firm is reducing exposure to listed property trusts and riskier fixed interest.

The start of a new year may be an artificial punctuation point, but it does provide breathing space to assess the drivers of asset allocation. This year, financial advisers are ramping up their rhetoric against home bias, warning about overexposure to Australian assets – and equities in particular.

But that kind of talk hasn’t stopped Aussie investors buying Australian investments in the past. So it will be interesting to see whether the anti-Aussie message hits home this time round.

Asked her thoughts about asset allocation in 2013, NAB private wealth senior adviser, Catherine Wong Doo, says she is encouraging clients to think about three key themes: the direction of the Australian dollar; the fact the Reserve Bank of Australia is still in loosening mode; and volatility.

For Wong Doo, the decisions that might follow from these themes are: an unhedged move into multinational equities; a move out of term deposits; and a move into alternative investments, both Australian and international.

“The NAB house view is that the Australian dollar will move 5 per cent lower against the US dollar over 2013,” she says.

“So the question is whether it’s a good time to move into overseas equities unhedged, or take the hedge off existing exposures.

“But we would argue it is still worthwhile getting the exposure to sectors you can’t access via Australian listed stocks: the multinational pharmaceutical companies, multinational consumer goods companies and multinational technology companies.”

NAB believes there could be a further interest rate cut from the RBA in the first half of 2013.

Many clients, Wong Doo says, have reacted to the uncertain world economy of the last few years by going into cash.

It’s not a risk-free environment for cash and fixed income any more, with tax and inflation eating into lower returns. “But the answer to the different world that is emerging now is not necessarily to switch back into equities,” she says.

“We are talking to them about alternative assets – assets which aren’t correlated to the equities market. We think there should be quite a large – 15 to 20 per cent – exposure to alternatives: private equity, commodity funds, hedge funds and global credit.”

The managing director investment advisory at Dixon Advisory, Lyle Meaney, says the big theme is the decline in interest rates.

“We deal mainly with self-funded retirees,” Meaney says. “Equities are looking more competitive, but they’re not risk-free. And investor appetite is strong for hybrid issues, but they are not the equivalent of the government guarantee. You need to be rewarded quite a lot for giving up the government guarantee.

“We think Australians are overexposed to Australian equities, so we have diversified overseas.”

Dixon has set up a residential property fund specialising in multi-family homes in the greater New York area targeting returns of 6 to 8 per cent. And because some clients do want growth, it has also put together two equities fund of funds, one specialising in Asian equities and another in emerging markets. All three are listed, Meaney says.

Multiforte Financial Services director and financial adviser, Kate McCallum, says the new year is unlikely to mark a noticeable shift in asset allocation.

“There shouldn’t be a lot that you need to move because of noise in the market,” she says. “But we do want to get better bang for buck.”

Over recent months Multiforte has been slowly reducing client exposure to listed property trusts and the riskier end of fixed interest.

“The risky part now is the corporate bond market and credit securities or hybrid funds. We’re gradually reducing exposure.”

McCallum agrees it’s time to consider shifting out of term deposits. “Low yields mean they’re not really preserving the value of capital. The question we ask clients is, how much capital do they really want preserved. We call it a capital management approach?”